Veteran traders shift from signals to clicks
By Mark Skertic
Tribune staff reporter
Published August 30, 2004
Sitting in front of a computer screen trading U.S. Treasury futures, Brian Hynes grimaced, shaking his head at the columns of red and blue numbers in constant motion.
"Electronic trading is here," said Hynes, a trader at the Chicago Board of Trade since 1991. "I wish it wasn't."
Given a choice, he'd rather flash signals for his trades on the floor of the Board of Trade in the 10-year U.S. Treasury note pit. Instead, he's 2 miles from the LaSalle Street financial crowd, trading with pretend money in a Michigan Avenue office building.
"I've been on this simulator for three weeks," said Hynes, 35. "And it's probably going to be a lot longer than three weeks."
Hynes is at Geneva Trading, a firm that until recently only trained those it hired. This summer, however, it began to reach out to traders like Hynes with the opening of its Professional Trading Center.
The center caters to longtime floor traders who want to learn how to buy and sell financial futures via computer as traders increasingly shun open pit trading in futures markets and embrace electronic systems.
The shift has been taking place during the last decade, but it accelerated significantly during the last year as both the Board of Trade and Chicago Mercantile Exchange faced new competition from rival exchanges that don't have trading floors and do all trades electronically.
Making complex futures trades electronically is not the same as buying a hundred shares of stock online. Typically, futures traders use a setup that has three or four connected flat screens. Intricate trading strategies are possible, with users dealing multiple products in different markets at the same time.
Moving from the pit to screen involves more than mastering the software, said Mary McDonnell, Geneva's president and chief executive. It's about learning to follow the ebb and flow of the markets just by watching the bids and offers on the screen.
"They have to unlearn things," she said. "You have to stop having any reliance on momentum noise telling you something is about to happen. Obviously, it's not there."
Founded in Dublin in 1999 by former floor traders at the London International Financial Futures and Options Exchange, Geneva is a proprietary-trading house that deals in the world's largest financial futures markets. Both the Chicago and Irish offices train traders who work exclusively for Geneva. The addition of the Professional Trading Center is a way to meet a need in the industry, McDonnell said.
Hynes said he loved working in the 10-year Treasury open outcry pit, toe-to-toe with other traders, where noise and emotion are a part of the buying and selling environment. That changed as those trading on computers picked up a larger proportion of the volume. Traders in the pit try to compensate with hand-held computers, but it's not the same, Hynes said.
"When open outcry was 100 percent open outcry, it was a wonderful place to work," he said. "It was a great market; it was a great opportunity to learn how to trade. As it's been split up, it's really ruined it. It almost didn't become trading, because the screen just dominated. We more became like screen readers.
"That's why I left. I used to love going to work. And the screen just took it away."
Other seminars available
There are several trading schools in Chicago that promise to teach the techniques and skills necessary to work on the floor or via a computer screen. The Chicago Mercantile Exchange's Globex Learning Center also provides classes and simulations for traders at the Merc or Board of Trade who want to move to the screen.
Geneva's program is different because of the possibilities it offers, McDonnell said.
"We really want people who understand our philosophy--and who realize that it's going to take time," she said. "That they have the patience and the financial wherewithal to know that they're not going to make the money they were making."
Getting up to speed takes time for newcomers to screen trading.
The eight-week training course lets traders learn on the same electronic-trading system that most professionals use. Once traders are comfortable, Geneva can offer them something else--a place to work.
For a commission, they will have access to technology in an environment with other electronic traders. Finding the right place to work, with a system that gives them access to the markets they want and other traders nearby is something many are looking for when they leave the floor, McDonnell said.
Hynes' early frustration with electronic trading is understandable, she said. Many floor traders have to understand that of all the skills they learned on the trading floor, the only ones that translate are their familiarity with the products and the patience they learned in the pits.
Traders used to keeping active
Put them in front of a screen, and most traders will forget that patience, running through their money before they master electronic trading, McDonnell said.
"I think it's the feeling that you always have to be doing something," she said. "When you're on the floor, maybe you're talking, you're looking around. You're used to doing a lot of stuff; you're used to being active."
Hynes said he has flashes of inspiration, where for an instant everything he's watching on the screen makes sense. He watches the young, just-out-of-college traders Geneva hires and trains with awe.
"You see these young kids, just whipping it around, and I'm like in a beginning typing class--it's a big ego crusher," Hynes said. But then a bit of the floor trader bravado slips into his voice. "But when I get it, it's going to be unbelievable.
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Pits for bytes
What's happening: Chicago pit traders are training themselves to trade stocks, futures and options via computer.
Behind the trend: During the last decade electronic trading has grown in popularity and thinned crowds in open outcry pits at the Chicago Board of Trade and Chicago Mercantile Exchange. The shift has been especially dramatic in the last year as all-electronic exchanges debuted, offering new competition.
A key lesson: Traders have had to unlearn their reliance on momentum noise, which indicates when something is about to happen in the pits.
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